CalHHS Agency releases initial HR 1 summary
HR 1 affects MCO taxes, hurts hospitals and clinics, raises state and local CalFresh costs, and may cut millions off of some safety net programs, webinar notes
Departments of California’s Health and Human Services Agency (CalHHS) have released a webinar with an initial summary of the effects of H.R. 1, federal Republicans’ new budget and tax bill, on the state’s health and social services programs. The CalHHS webinar on H.R. 1 is available via YouTube here.
H.R. 1 will change significantly the relationship between the federal government and state governments. The new law’s effects will take years to ascertain with precision—in part due to the need for significant regulatory guidance from federal departments charged with implementing the new law. The law’s effects spread to other parts of state and local government too, but perhaps no part of government more so than the programs administered by CalHHS.
The CalHHS webinar emphasizes that California’s more than decade-long policy effort to expand health care coverage will be hurt significantly by H.R. 1. Close to 94% of Californians had health care coverage as of 2022, according to an analysis by the California Health Care Foundation. “That 6% uninsured rate is a steep improvement from a peak of around 15% in 2013,” CHCF noted. A subsequent expansion of Medi-Cal eligibility to all low-income Californians regardless of immigration status likely further lowered the uninsured rate. Recent state budget cuts for the Medi-Cal program also will add to the numbers of uninsured in the future.
Assembly Budget Subcommittee No. 7, chaired by Asm. Gregg Hart (D-Santa Barbara), currently plans an informational hearing on August 20 concerning H.R. 1’s effects on the state budget.
Some notable points from the CalHHS webinar:
“California’s current managed care organization (MCO) tax structure is non-compliant under [H.R. 1’s] new parameters and will need to be modified to align with the new federal standards (though it may be challenging to do so without decreasing the revenue from the tax),” a webinar slide notes. “The new constraints jeopardize other major provider taxes, including the Hospital Quality Assurance Fee, threatening revenue streams.” The webinar audio notes the effective date of key provider tax limitations “is the date of [H.R. 1’s] enactment unless the federal Department of Health and Human Services Secretary chooses to allow for a transition period of up to three years.”
“An estimated up to 3 million Medi-Cal members may lose coverage” due to H.R. 1’s work requirements, effective in 2027. This “will significantly drive up the uninsured rate and raise costs for hospitals and clinics treating uninsured patients,” the webinar states.
The webinar notes that due to the federal Republican bill, “as many as 660,000 Covered California enrollees could go uninsured, all Covered California enrollees will see significantly higher costs, and there will be burdensome new red tape making it harder for Californians to get and stay covered.”
“An estimated 400,000 Medi-Cal members may lose coverage” due to H.R. 1’s requirements for states to redetermine eligibility for ACA-expansion adults every six months, instead of every 12 months, effective in 2027. This “will drive up the uninsured rate and raise costs for hospitals and clinics treating uninsured patients,” the webinar states.
“Approximately 200,000 immigrant Medi-Cal members will shift from satisfactory immigration status (SIS), which is eligible for full Federal Financial Participation (FFP), to unsatisfactory immigration status (UIS), which is only eligible for emergency and pregnancy-related FFP,” under H.R. 1’s restrictions on lawful immigrant eligibility, effective October 1, 2026. This part of H.R. 1 affects specified groups of immigrants, such as “most refugees, asylees, victims of human trafficking, certain individuals whose deportation is being withheld or who were granted conditional entry, or individuals who received humanitarian parole, such as certain Afghans who aided U.S. operations in Afghanistan or people fleeing violence in the Ukrainian war,” the webinar slide notes.
The webinar discusses H.R. 1’s ban on Medicaid participation by certain providers of abortion services, including Planned Parenthood, that is the subject of recent litigation.
“Up to 395,000 people could lose benefits” under the Supplemental Nutrition Assistance Program (SNAP), known as CalFresh in California, the webinar notes. In addition to benefit losses, including new limits on noncitizen eligibility, H.R. 1 will shift up to $2.7 billion of costs to the state and counties for benefit and administrative costs for SNAP.
Most actions to respond to H.R. 1 will await federal guidance and occur in future years. Some initial responses to prepare for implementation of the new law could be proposed during the final weeks of this year’s regular legislative session in August and September. Other responses seem likely during regular legislative sessions in 2026, 2027, and 2028. Over time, the state likely will need to rethink its safety net programs, given the federal government’s decision to sharply pull back from its prior involvement with those programs.
Even before considering the effects of H.R. 1, California faced projected annual General Fund deficits of $17 billion to $24 billion through 2028-29 and the expiration of voter-approved taxes on high-income households in 2030. Accordingly, there seems little or no prospect of the state sustainably backfilling a big portion of H.R. 1’s cuts. The state also will have to decide in the coming years which elements of H.R. 1’s new federal tax policies to “conform” to at the state level, as well as any other changes in state tax policy to react to H.R. 1.